MONTREAL – Dorel Industries Inc. is hoping for a warm spring in North America and Europe to boost bicycle sales and profits after net income dropped nearly two-thirds to US$11 million in last quarter of 2013.
The Montreal company makes bicycles under several brands, including Cannondale and Schwinn, and is aiming to become a global bicycle and bicycle apparel company. Sluggish sales and earnings caused by soggy and cold weather last spring resulted in Dorel cutting 50 jobs.
“The weather is always a variable that we cannot control, but if last spring’s record rain and cold in both North American and Europe are not repeated, we are definitely well positioned to return to much higher levels of profitability,” president and CEO Martin Schwartz told financial analysts Tuesday.
The company announced in January that it was restructuring its bicycle operations by closing a U.S. assembly facility and relocating its research operations, a move expected to affect about 100 employees but also to help make it more competitive.
“There’s no question 2013 was tough for us, but for the entire industry. We are tackling what we can control,” Schwartz said of the recreation and leisure division, which makes bicycles.
Dorel (TSX:DII.B) also makes home furnishings and child-safety car seats sold under numerous brands such as Safety 1st and Cosco.
Schwartz said earnings for the first quarter of 2014 should improve by 20 per cent to 25 per cent over last year and the division that makes bicycles should also improve its earnings this year.
But he said the company’s performance in 2013 was disappointing.
“A number of issues we faced were industry and economy related, but others were the result of less than perfect execution on our part.”
The Montreal-based company’s profit in the fourth quarter, expressed in U.S. currency, amounted to 34 cents per share before adjustments. A year earlier, net income was US$29.1 million or 91 cents per share.
Excluding the impact of restructuring its bicycle business, Dorel’s adjusted net income was US$19.2 million or 60 cents per diluted share.
That’s well below analyst estimates, which had already been reduced after Dorel announced a month ago that its leisure and recreation business would be hurt by weak bicycle sales and prices.
Analysts had recently estimated Dorel would have 90 cents per share of net income, or 77 cents per share on an adjusted basis.
National Bank Financial analyst Leon Aghazarian summed up 2013 for Dorel as “a tough year ends with a miss.”
Dorel’s overall revenue during the three months ended Dec. 30 was $633.5 million, up 1.8 per cent from a year earlier, with the leisure and recreation segment increasing 8.3 per cent to $245.5 million.
Dorel recognized US$13.5 million in pre-tax restructuring charges in the quarter related to the division, contributing to a US$5.4-million operating loss — compared with a year-earlier operating profit of US$16.5 million.
Excluding the restructuring charges, the leisure and recreation division posted US$8.1 million in operating profit.
The juvenile segment, which makes child car seats, saw revenue drop 4.5 per cent to $255.2 million from $267.4 million, but it continued to have an operating profit of $18.4 million, down 1.4 per cent from $18.6 million.
The home furnishings division increased revenue 3.2 per cent to $132.8 million from $128.6 million, but its operating profit dropped 31.4 per cent to $5 million from $7.3 million.
Dorel’s revenue for the full year was US$2.4 billion, down 2.2 per cent from US$2.5 billion in 2012, while its net income dropped by half to US$57.7 million or US$1.79 per diluted share from US$108.5 million or US$3.39 per diluted share the previous year.
Excluding full-year restructuring charges, Dorel’s adjusted net income for the year was US$67.1 million or US$2.09 per diluted share.